Although 2020 started off just like any other year, we entered uncharted waters in March as the COVID-19 pandemic took hold and wreaked havoc on lives and economies around the world.
To recognize the impact this black swan event had on financial advisors and the way they run their businesses and interact with clients, we looked through the approximately 250 in-depth articles published on Globe Advisor this past year. Throughout the holiday season, we will feature some of the best work we produced during the past year.
Each day, we will highlight 10 of the top stories on a specific theme or topic. We’ll begin by taking a close look at retirement. The COVID-19 pandemic affected not only clients’ retirement plans, but those of advisors as well.
Given the uncertainty of how a prolonged COVID-19 pandemic will affect Canadians’ long-term travel plans, snowbirds across the country are concerned about the implications of holding or selling their vacation properties in the United States. As many didn’t anticipate the need to change their winter migration patterns, some are turning to their advisors to help them figure out what to do.
COVID-19 is magnifying the tendency for some Canadians to retire earlier than they had planned because of a disappearing business or changing employment situations. Darren Coleman, senior vice-president, private client group, and portfolio manager at Coleman Wealth, a division of Raymond James Ltd. in Toronto, says many Canadians have had to face that reality. “We’re seeing lawyers who have been affected … restaurant owners, service providers, many, many people whose plans were going along just fine and, suddenly, there’s nowhere to hide.”
Watching the economic impact of the COVID-19 pandemic take a bite out of investment portfolios earlier this year was especially tough for baby boomers, the first generation to leave the workforce with relatively high exposure to equities. That’s because low interest rates have made typical retiree investments such as bonds, guaranteed investment certificates and savings accounts less attractive. But with the onset of the bear market earlier this year, some baby boomers may have regretted having a higher mix of equities in their portfolios.
The COVID-19 pandemic has triggered a wave of succession planning among advisors that some believe could become the largest transition the industry has ever seen. Every major crisis leads to a rise in succession planning among advisors, says George Hartman, president and chief executive of Market Logics Inc. in Toronto. In addition to the usual factors such as increased market volatility and lower short-term growth potential, the pandemic has created multiple reasons for more experienced advisors to consider passing the baton on to the next generation.
Advisors ready to begin the succession planning process amid COVID-19 may find that the usual strategies no longer apply. That’s particularly so for independent advisors hoping to recruit and groom a younger heir to eventually take over their books of business as some experts warn the process has become slower and more challenging because of the pandemic. Furthermore, there is a growing divide between what older and younger advisors are willing to provide one other to facilitate a smooth succession.
Property values have risen steadily across Canada in recent decades, giving retirees who own their homes some extra financial cushion for their golden years. As it’s not uncommon for many people to have most of their assets tied up in their homes, retirees who don’t have enough savings may need to borrow against their property, either through a home-equity line of credit or a reverse mortgage, or to sell the home and buy a cheaper one or rent. We take a closer look at the pros and cons of each of these options.
COVID-19 has put a stop to many retirees’ travel and lifestyle plans. Although most retirees are capable of weathering the financial storm without making significant adjustments to their portfolios, it’s how the pandemic will affect their lifestyles over the next year or two that has left many wondering what to do instead. And even if borders do open up, there’s no guarantee those who had travel plans will be able to obtain travel insurance that doesn’t exclude coverage for treatment of COVID-19.
The stock market volatility brought on by COVID-19 has advisors fielding questions from older clients about whether they need to go back to work or stay in their jobs longer. Some older workers “may need to spend extra years on the workforce, or settle for a lower level of retirement income [because of the recent stock market] slump,” says Joseph Nunes, co-founder and executive chairman at Actuarial Solutions Inc. in Oakville, Ont. For people in retirement now, or close to it, options may include working longer, spending less, or changing their asset allocation to better reflect any changes in their portfolios caused by the market volatility.
Susan Latremoille, former director, wealth management and wealth advisor with the Latremoille Begg Group at Richardson GMP Ltd. in Toronto, was looking back on three decades in financial services when she realized she wanted to embark on a new challenge during her retirement. After years of observing clients who were unhappy in retirement despite having helped them setup comfortable financial plans, she wanted to help clients find fulfillment in their new stage of life.
Although there are more older Canadians who are choosing to work during their traditional retirement years, they’re facing the challenge of looking for ways to reduce the taxes they pay on income from various sources. Canadians working in their late 60s and early 70s are running into the issue of balancing money earned on the job with income from other sources such as the Canada Pension Plan, Old Age Security, as well as pensions and registered and non-registered investments.